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Is Becton, Dickinson and Company (NYSE:BDX) a Fairly Valued Dividend Aristocrat Stock?

We recently compiled the list of 25 Best Dividend Aristocrats Stocks According to Analysts. Since Becton, Dickinson and Company (NYSE:BDX)  ranks higher on our list, we have analyzed the stock in detail.

The age-old debate of investing in dividend growth or high-yield stocks continues to reappear within the dividend investing realm. Between these two, dividend growth is currently the favored option in the market as investors seek out strategies to grow their income over time. In this regard, investors turn to dividend aristocrats, which are the companies that have raised their payouts for 25 consecutive years or more. These stocks have delivered strong returns over the years regardless of market conditions. Between February 2005 and December 2023, dividend aristocrats delivered a 12.50% return in falling interest rate periods and an 11.5% return in rising interest rate periods, according to data by Bloomberg.

Numerous analysts have pointed out the long-term potential of dividend growth stocks, a sentiment echoed by Warren Buffett’s investment in Coca-Cola. Back in August 1994, Berkshire Hathaway completed its acquisition of 400 million shares in the company, worth $1.3 billion. Berkshire initially received a cash dividend of $75 million from Coca-Cola in 1994, the amount which surged to $704 million in 2022. This shows a remarkable growth potential of dividend-paying investments over the long term.

With investors showing a growing preference for dividend-paying stocks, major tech companies started initiating their dividend policies this year. Mark Iong, an equity fund manager at Homestead Advisers, expressed his approval of this move by tech companies in one of his recent interviews with Bloomberg. Here are some comments from the analyst:

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“Dividends will be table-stakes for big tech going forward. I think if you don’t pay one, it will now be taken as a sign your business is more volatile. What’s exciting is they are doing dividends and buybacks simultaneously, while also cutting costs and growing, which is them stepping on the pedal for profits across the board.”

Not limited to the tech sector alone, companies across the broader market are showing a strong commitment to dividends this year. Though these equities lagged behind the market last year, their outlook remains strong this year. According to a recent report by S&P Dow Jones Indices, in the first quarter of 2024, companies in the index paid $151.6 billion in dividends, up from $146.8 billion paid during the same period last year. In addition, 796 companies reported dividend hikes during the quarter, amounting collectively to $22.7 billion. Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, expects that the index will report a 6% year-over-year increase in dividend payments in 2024.

Now, let’s take a look at some of the best dividend aristocrat stocks to buy according to analysts.

Is Becton, Dickinson and Company (NYSE:BDX) a Fairly Valued Dividend Aristocrat Stock?
Is Becton, Dickinson and Company (NYSE:BDX) a Fairly Valued Dividend Aristocrat Stock?

Photo by Scott Graham on Unsplash

Our Methodology:

For our list, we first scanned a list of the best dividend aristocrat stocks, which are the companies that have raised their dividends for 25 consecutive years or more. From this group, we picked stocks with a projected upside potential of over 10% based on analyst price targets. The stocks are ranked according to their upside potential, as of May 26. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 920 funds as of Q1 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

Becton, Dickinson and Company (NYSE:BDX)

Upside Potential as of May 26: 24.9%

Becton, Dickinson and Company (NYSE:BDX) is next on our list of the best dividend aristocrat stocks to buy now. According to analysts, the stock has an upside potential of nearly 25%. AI technology is continually advancing within the medical industry, positioning BDX to gain significantly from its integration. The company is also actively collaborating with other companies to launch its AI-related products. In addition to this, the company has always prioritized sustainability in its operations. David Blood and Al Gore, who have always shown commitment to long-term sustainable investments, boosted their stake in the company by 72% in the first quarter of 2024.

That said, rising inflation and overall market conditions can affect the demand and pricing of Becton, Dickinson and Company (NYSE:BDX)'s products and services. These challenges can also disrupt their supply chain and raise borrowing costs, ultimately impacting the business. In addition, the company earns a solid portion of its revenue from its international operations. Though its international sales have grown by 2.6% on a year-over-year basis, the demand for its products remained weak in China. The stock is down by 6.20% over the past 12 months and has a forward P/E of 16.6, which shows that it is relatively cheap. The stock can be considered for its dividend but due to these macroeconomic concerns, we believe that other healthcare stocks are more favorable for investment.

Becton, Dickinson and Company (NYSE:BDX) has been raising its dividends consistently for the past 52 years. The company currently pays a quarterly dividend of $0.95 per share and has a dividend yield of 1.66%, as of May 26.

At the end of Q1 2024, 60 hedge funds tracked by Insider Monkey owned stakes in Becton, Dickinson and Company (NYSE:BDX), which remained unchanged from the previous quarter. The consolidated value of these stakes is over $2.5 billion.

Overall BDX ranks 3rd among the best dividend aristocrat stocks according to analysts. You can visit 25 Best Dividend Aristocrats Stocks According to Analysts to see other dividend aristocrats that are on analysts’ radar. While we acknowledge the potential of dividend growth stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as Microsoft but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

Read Next: Michael Burry Is Selling These Stocks and Jim Cramer is Recommending These Stocks.

Disclosure: None. This article is originally published at Insider Monkey.